China Information Security Technology, Inc.: Exhibit 10.2 - Prepared by TNT Filings Inc.




  



	
    Exhibit 10.2

	 
	 
	 
	EQUITY TRANSFER AGREEMENT
	 
	 
	 
	JIN ZHU CAI
	 
	AND
	 
	JIANG HUAI LIN
	 
	 
	 
	July 1, 2008
	 
	 
	 





EQUITY TRANSFER AGREEMENT 


This EQUITY TRANSFER AGREEMENT (this
"Agreement"), dated as of July 1, 2008, by and between Jin Zhu Cai, an
individual (the "Transferor") and Jiang Huai Lin, an individual (the "Transferee")
(each a "Party" and collectively the "Parties"). 


BACKGROUND 


The Transferor owns 24% of the equity
of iASPEC Software Co. Ltd. (the "Company"), a limited liability company
established and validly existing under the laws of the People’s Republic of
China (the "PRC"). The Transferee owns 76% of the equity interest of the
Company and is the Chief Executive and Chairman of Information Security
Technology (China) Co. Ltd. ("IST"), a PRC limited liability company and
the Company’s exclusive commercial partner, and of IST’s parent company, China
Information Security Technology, Inc. ("CIST"), a Nevada corporation
listed on the Nasdaq Global Select market. The Transferor agrees to transfer and
sell to the Transferee, all of his equity in the Company (the "Equity"),
and the Transferee agrees to purchase such Equity on the terms and conditions
set forth in this Agreement, such that upon completion of the transfer
hereunder, the Transferee shall fully own 100% of the equity and control power
of the Company. 

Pursuant to a management services
agreement ("MSA"), dated as of July 1, 2007, by and among CIST, IST, the
Company and the Parties, the Board of Directors of IST is required to authorize,
in advance, certain material actions taken by the Company and its shareholders,
including but not limited to, the sale or transfer by any of the Parties of any
part of the Company’s equity held by them, including the Equity. 


AGREEMENT 

1. 



Equity Transfer 


1.1 


On and subject to the terms and conditions of this Agreement, the Transferee
agrees to purchase from the Transferor, and the Transferor agrees to sell to the
Transferee the Equity of the Company for the consideration specified below in
Section 2 hereof. 

1.2 


The Parties agree that from and after the Completion Date (defined herein), the
Transferee will be entitled to all legal rights derived from the Equity and
responsible for related legal obligations. All legal rights and obligations
related to the Equity are determined by certain PRC laws and regulations and the
articles of incorporation of the Company. The Transferee shall fully indemnify
and shall keep indemnified the Transferee from any
liabilities or debts in connection with the Equity, except those that have been
disclosed to the Transferees prior to the execution of this Agreement. The
Transferee shall have the right to claim damages against the Transferor if the
Transferee incurs damages due to undisclosed liabilities or debts. "Completion
Date" means the date on which the rights of ownership of the Equity have
been transferred to the Transferee and the change of registration is complete in
accordance with applicable PRC laws, administrative regulations, local
regulations, department rules, normative documents and other administrative
orders with a general binding force in the PRC; provided however, that
the Completion Date shall be no later than July 15, 2008. 


-2-




1.3 


The Transferor shall provide the Transferee with any assistance necessary to
effect the registration of the transfer of the Equity. 

1.4 


After the Completion Date, the Purchaser will become the sole owner of 100% of
the equity in the Company. 


2. 


Purchasing Price and Payment Method 


2.1 


The consideration for the transfer of the Equity shall be RMB60,000,000
(approximately $8,720,996 at a conversion rate of RMB6.88:$1) (the "Purchase
Price"). 

2.2 


Upon the terms and subject to the all of the conditions contained herein,
Transferee shall pay the Purchase Price by transferring and delivering an
aggregate of 1,527,855 shares of restricted common stock of CIST owned by
Transferee, valued at $8,720,996 in the aggregate, or at $5.708 per share (the "Shares").
The Parties understand and acknowledge that the Purchase Price is based upon a
valuation of the Equity at 24% of Company’s registered capital of RMB50 million,
times a multiple of 5. 

2.3 


The Transferee shall deliver to the Transferor certificates evidencing the
Shares, endorsed in blank or accompanied by duly executed assignment documents
and including a Medallion Guarantee or a customary substitute therefor, on or
before the Completion Date. 


 


-3-




3. 


Conditions Precedent to Transfer 


This Agreement
shall become effective when all the terms and conditions set forth below are
satisfied: 

(1) 


each Party has executed this Agreement; 

(2) 


the shareholder meeting of the Company has approved the transfer of the Equity;
and 

(3) 


the Board of Directors of IST has approved the transactions contemplated by the
Agreement, as required by the MSA.


4.



Representations, Warranties, and
Undertakings 


4.1 


The Transferor hereby represents, warrants and undertakes to the Transferee
unconditionally and irrevocably as follows: 

(1) 


The Transferor has and shall have full power and authority to enter into and
execute this Agreement which constitutes binding obligations on the Transferor
in accordance with the terms at the date of this Agreement; 

(2) 


The Transferor has all the legally required authorizations and approvals to
execute the Agreement and perform the obligations hereunder; 

(3) 


The Transferor legally holds the Equity, free of pledge, mortgage, charges or
claims, and the Transferor does not know any third party that has claimed or
will claim any right which would have a material and adverse effect over all or
part of Equity and there are no disputes, litigations, arbitrations or
administrative penalties in respect of the Equity; and 

(4) 


The execution and delivery of this Agreement, and the performance by the
Transferor of his obligations hereunder, will not violate any applicable laws or
conflict with the terms and conditions of any existing agreements; 

-4-




(5) 


The Transferor hereby: (a) acknowledges that the certificate(s) representing or
evidencing the Shares contain a customary restrictive legend restricting the
offer, sale or transfer of such Shares except in accordance with the provisions
of Regulation S, pursuant to registration under the Securities Act, or pursuant
to an available exemption from registration; (b) agrees that all offers and
sales of such Shares shall be made pursuant to an effective registration
statement under the Securities Act or pursuant to an exemption from, or a
transaction not subject to the registration requirements of, the Securities Act;
(c) represents that the offer to purchase the Shares was made to such Transferor
outside of the United States, and such Transferor was, at the time of the offer
and will be, at the time of the sale and is now, outside the United States; (d)
has not engaged in or directed any unsolicited offers to purchase shares of
CIST’s Common Stock in the United States; (e) is neither a U.S. Person nor a
Distributor (as such terms are defined in Section 902(a) and 902(c),
respectively, of Regulation S); (f) has purchased the Shares for its own account
and not for the account or benefit of any U.S. Person; (g) after the Completion
Date will be the sole beneficial owner of the Shares and has not pre-arranged
any sale with a purchaser in the United States; and (h) is familiar with and
understands the terms and conditions and requirements contained in Regulation S,
specifically, without limitation, the Transferor understands that the statutory
basis for the exemption claimed for the sale of the Shares would not be present
if the sale, although in technical compliance with Regulation S, is part of a
plan or scheme to evade the registration provisions of the Securities Act. 

(6) 


All the representations, warranties, and undertakings and the documents
concerning the Transferor provided by the Transferor are true, accurate,
integral and complete. 

-5-




4.2 


The Transferee hereby represents, warrants, and undertakes to the Transferor
unconditionally and irrevocably as follows: 

(1) 


The Transferee has and shall have full power and authority to enter into and
execute this Agreement which constitutes binding obligations on the Transferee
in accordance with the terms at the date of this Agreement; 

(2) 


The Transferee has all the legally required authorizations and approvals to
execute the Agreement and perform the obligations hereunder; and 

(3) 


All the representations, warranties, and undertakings and the documents provided
by the Transferee are true, accurate, integral and complete. 


5. 


Liability for Breach of Agreement 


5.1 


If any event described below occurs due to either Party, it shall be deemed as a
breach of the Agreement: 

(1) 


violation of any obligations or representations defined herein; or 

(2) 


any misrepresentation or breach of warranties contained herein (intentionally or
unintentionally). 

5.2 


The breaching party shall take action to mitigate the breach within thirty (30)
days upon the request of the other party. In the event the breach is not
remedied within such period, the non-breaching party has the right to terminate
the Agreement. The breaching party shall compensate the non-breaching party for
all the economic damage resulting from such breach. 


6. 


Force Majeure 


6.1 


Reference to "force majeure" in this Agreement are to those situations that are
unforeseeable, unavoidable and the consequences of such are uncontrollable.
These situations include but are not limited to earthquakes, typhoons, water
calamities, war, strikes, government activities, and other similar events that
are commonly deemed uncontrollable in accordance with normal international
business practice. 6.2 In the event of a force majeure, the party suffering the
damage shall, within ten (10) days from the occurrence of such event, provide to
the other party the relevant evidence witnessing the event which shall be issued
by a competent public notary. 6.3 The failure to fulfill this Agreement of
either Party due to a force majeure event shall not be deemed to be breach of
the Agreement; provided that, however, the Parties shall use their best efforts
to mitigate the damages caused by the force majeure event. 

-6-




7. 


Amendment, Cancellation and Termination 


1.1 


Unless otherwise indicated, this Agreement will be terminated if any one of the
following happens: 

(1) 


The Parties mutually decide to terminate this Agreement through negotiation; 

(2) 


The purpose of the Agreement cannot be achieved by the Parties because of force
majeure events; 

(3) 


Due to the other Party’s breach of the Agreement, the non-breaching party
terminates this Agreement according to Section 5.2. hereof; or 

(1) 


This Agreement is declared invalid as a whole by a court or other competent
authorities of the PRC. 

1.2 


In the event of a termination pursuant to Section 7.1(3) hereof, the
non-breaching party shall be entitled to exercise all rights under this
Agreement, including recovery of damages. 

1.3 


This Agreement may be amended or supplemented upon the mutual consent of the
Parties. Any amendment or supplement to the Agreement shall be made in written
form and shall become effective upon signing by the Parties. Such amendment or
supplement shall be deemed as an integral part of the Agreement. 

-7-




8. 


Governing Law and Dispute Settlement 


1.1 


This Agreement will be governed by and construed in accordance with the laws of
the PRC, excluding Hong Kong Special Administrative Region, Macao Special
Administrative Region and Taiwan of the PRC. 

1.2 


The Parties shall take efforts to settle any dispute arising from interpretation
or performance of or in connection with the Agreement through friendly
consultations. In case no settlement can be reached through such consultations,
the dispute shall be adjudicated by the court sitting in the PRC jurisdiction
where the Agreement is executed. 

1.3 


The Parties shall continue performing all the obligations contained in this
Agreement except for the clauses related to the disputed issues. 


9. 


Notices 


1.1 


Any notice, request, demand, claim or other communications hereunder must be in
writing, in Mandarin, and must be dispatched by Express Mail, facsimile
transmission or personally to the receiver’s registered address. Such notice,
request, demand claim or other communication shall be deemed to be given: (a) in
case of delivery personally, upon delivery; (b) in case of Express Mail, on the
stated date of acceptance on the receipt; or (c) in case of facsimile
transmission, upon receipt of the confirmation message from the fax machine. 

If to Transferor:



	
    c/o China Information Security Technology, Inc.

	
    21st Floor, Everbright Bank Building,

	
    Zhuzilin, Futian District, Shenzhen, Guangdong,

	
    People’s Republic of China 518040

	
    Tel.: (+86) 755 -8370-8333

	
    Fax: (+86) 755-8370-9333 

	 



-8-




If to Transferee: 

c/o China Information Security
Technology, Inc. 

21st Floor, Everbright Bank Building, 

Zhuzilin, Futian District, Shenzhen, Guangdong, 

People’s Republic of China 518040 

Tel.: (+86) 755 -8370-8333 

Fax: (+86) 755-8370-9333 


10. 


Miscellaneous 


1.1 


This Agreement shall be binding upon and inure to the benefit of the Parties
named herein and their respective successors and permitted assigns. No Party may
assign either this Agreement or any of his or its rights, interests, or
obligations hereunder without the prior written consent of the Parties. 

1.2 


Any term or provision of this Agreement that is held invalid or unenforceable in
any situation in any jurisdiction shall not affect the validity or
enforceability of the remaining terms and provisions hereof. 

1.3 


The section headings contained in this Agreement are inserted for convenience
only and shall not affect in any way the meaning or interpretation of this
Agreement. 

1.4 


This Agreement may be executed with five (5) copies and each of which shall be
deemed an original and shall be valid and binding for all purposes. 

[Signature Page Follows] 

-9-




IN WITNESS WHEREOF, the Parties
hereto have executed this Agreement on as of the date first above written. 



  	TRANSFEROR:
	 	
      /s/_Jin Zhu Cai
	 	
      Jin Zhu Cai
	 
	 
	 
	TRANSFEREE:
	 	
      /s/ Jiang Huai Lin
	 	
      Jiang Huai Lin




 

 


-10-